3 in 2009 in addition real gross domestic product1

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Unformatted text preview: /11 http://americancenturyblog.com/2011/01/russia%E2%80%99spush-for-economic-diversificationand-modernization/] “One of the biggest problems facing Russia, however, is its lack of economic diversification and overreliance on revenues from oil and gas exports.” Since the collapse of the Soviet Union two decades ago, Russia has transformed itself from a centrally planned to a market-based economy. Along the way, however, the country’s push for economic diversification and modernization hasn’t been easy. Russia is contending with a host of issues, including a crumbling infrastructure, an aging workforce and inadequate pension system, and the development of new gas and oil fields to replace depleting current ones. Property rights remain weak and state interference in the private sector is also problematic. One of the biggest problems facing Russia, however, is its lack of economic diversification and overreliance on revenues from oil and gas exports. During the Great Recession, Russia’s economic dependence on oil and gas exports manifested itself more than the country’s leaders expected. As a result of plunging commodity prices, the country was among the hardest hit by the global economic crisis and the central government’s budget went from a surplus of 4.1% in 2008 to a deficit of 6.3% in 2009. In addition, real gross domestic product1 (GDP) growth dropped by 7.8% in 2009— the biggest decline on record. Consequently, the government is hoping to break its economic dependency on commodity export revenues and at the same time reduce its budget deficit. While economic reforms in the 1990s privatized most of Russia’s industrial base, the notable exceptions were the oil and gas sectors, where mismanagement and an exceptionally high rate of taxation has impeded growth and left them chronically underinvested. The good news for investors is that it is looking more likely that the government will relax its taxation of the sector and provide more incentives for exploration and development . The government is also selling stakes in a number of large state-owned companies to private investors. 138 Oil DDW 2012 1 139 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 A2 Oil Bad – US Econ 140 Oil DDW 2012 1 US Oil sales are the lynchpin of the economy – multiple industries Epstein 6/15/12 [Alex Epstein, Founder and Director, Center for Industrial Progress, and principal at masterresource http://www.masterresource.org/2012/06/love-oil-companies-educate/] This election year, America faces many crucial legislative choices in the oil/gas industry–and the PR strategy of oil companies will certainly affect the outcome. What should oil company executives do to improve their industry’s reputation and secure their freedom to produce the lifeblood of civilization? Unfortunately, the conventional answer is: pretend they’re not oil companies. BP’s John Browne some years ago infamously declared his company’s aspirations to be “Beyond Petroleum”–a slogan that obviously does not aid the industry’s desire for more petrole...
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This note was uploaded on 01/30/2013 for the course ECON 101 taught by Professor Burke during the Spring '13 term at Southern Arkansas University.

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